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Plutus PowerGen

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Market:
AIM
Market Cap:
£676.21 k
Price
0.08 GBX
Change
-6.06%
52 weeks high
0.43
52 weeks low
0.08

STRATEGY

Plutus PowerGen is focused on developing a portfolio of 20MW FlexGen sites across the UK.

Demand for these types of projects is underpinned by structural changes to the UK’s power generation mix, which is seeing an increasing proportion of intermittent, renewable power introduced as legacy fossil capacity is retired. Plutus PowerGen currently has six operating sites, which hold capacity mechanism (‘CM’) contracts for 15 years, and a large pipeline of additional gas FlexGen projects at various stages of development. Central to its strategy is the identification of alternate fuel sources with a lower carbon-footprint, which can provide the Company with an additional revenue stream.

MARKET

Demand for flexible electricity generation is underpinned by structural changes to the UK’s power generation mix, which is experiencing an increasing proportion of intermittent, renewable power as legacy fossil capacity is retired.

Characteristics of the UK energy market
Increasing volatility

Renewable power generation has grown in the UK from 3% of energy supply in 2000 to currently more than 20%. With the ongoing retirement of high carbon sources of generation, this proportion is set to increase to more than 30% (see the graph below). The Government has committed to closing all coal-fired power stations by 2025, while new gas and nuclear generation is at least 10 to 15 years from coming online.

As the UK’s power generation mix shifts away from fossil fuels and becomes increasingly reliant on renewable sources, energy supply becomes more irregular: wind is an intermittent source, while solar energy is generated predominantly in the summer months, when least required. Balancing supply and demand is consequently an increasingly challenging, yet vital component of the energy supply market.

Tight capacity margins

The UK energy market is experiencing reduced capacity margins, i.e. the difference between peak electricity demand and the capacity available to meet this. For last winter, National Grid had forecast a buffer of just 6%, equivalent to 3GW, although the mild weather alleviated any operational pressure on the system. Operating challenges are expected to increase in the UK nuclear industry. Continuing high renewable deployments, the planned closure of coal generation and the aging condition of a substantial part of the UK nuclear industry all contribute to the UK nuclear industry challenges.

Increasing need for balancing services

The system operator, National Grid, is responsible for ensuring that the UK electricity system has sufficient supply to match demand. Since power cannot readily be stored in sufficient quantities as yet, matching must be done in real time. Small imbalances in supply and demand lead to frequency distortions, which are critical for many technologies connected to the system. Larger imbalances may lead to brownouts and blackouts.

National Grid classifies the capacity it makes available to address imbalances into four categories

  • Contingency reserve or margin
  • Short-term operating reserve (STOR)
  • Regulated (or fast) reserve
  • Low frequency response

National Grid has also requested notifications of interest in a new service called Enhanced Frequency Response, for very rapid response such as could be provided by battery storage units. Battery storage remains markedly higher cost than other short-term generation solutions and has technological limitations. As a result, this new market is thought likely to complement, rather than remove demand from existing frequency response markets.

In addition, energy balancing, using existing capacity in the main balancing market and involving demand reduction, also takes place across all time zones, although is used particularly in the 20 minutes ahead of the demand point.

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BUSINESS MODEL

Plutus PowerGen’s multi-revenue stream model is founded upon the roll-out of 20MW power generation sites, funded through a combination of equity and asset finance via dedicated subsidiaries.

Currently, Plutus PowerGen’s operating sites use established, reliable technology based on containerised generators, fired with biofuel. However, it is in the process of advancing a gas portfolio, evaluating and advancing planning on a number of sites. Treated as embedded generation, the unmanned gensets supply the local low voltage distribution network, reaching full output within 150 seconds of being switched on remotely. Each plant has a maximum generating capacity of 20MW. This is optimal for two reasons:

  • The planning thresholds – and therefore construction timescales – are reduced; and
  • The emissions fall below a European threshold, thereby reducing compliance costs and risk

Non-dilutive finance model

By setting up a dedicated entity for each site as part of its bottom up investment strategy, Plutus PowerGen limits medium-term dilution to existing shareholders. Plutus PowerGen has structured the company to allow for multiple funders on a project level, which reduces dilution to shareholders.

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STAND-ALONE PORTFOLIO

Plutus PowerGen currently has management contracts and 45% ownership of six operating sites, equivalent to 120MW (‘Rockpool portfolio’).

Plutus PowerGen’s flexible energy generation sites use established, reliable technology based on containerised generators, fired with biofuel. In line with its strategic shift to the development of higher-margin gas operations, the Company is looking to dispose of these sites and is in advanced discussion with potential buyers.

Case Study: Plymouth site

A 20MW operation was built on the site of the former Toshiba television factory in Ernesettle.   Although the Company’s sites are operated remotely and thus do not create local employment opportunities, the Company is keen to contribute to the communities in which its facilities are located. It therefore offered an undertaking to Plymouth City Council that it would provide up to £50,000 to support good causes located in the same ward as its site. So far, it has contributed to projects relating to infrastructure, sport and education.

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UK.

Plutus PowerGen Plc

Aldwych House
71-91 Aldwych
London
W2B 4HN
United Kingdom

Financial PR

St Brides Partners

Salisbury House
London Wall
EC2M 5QQ

ADVISERS

Registered Office

Plutus PowerGen Plc Aldwych House 71-91 Aldwych London W2B 4HN

Nominated Adviser and Broker

Allenby Capital Limited 5 St Helen's Place London EC3A 6AB

Auditors and Reporting Accountants

Welbeck Associates Limited 30 Percy Street London W1T 2DB

Solicitors to the Company as to English law

DMH Stallard LLP 6 New Street Square London EC4A 3BF

Registrars

Share Registrars Limited Suite E First Floor 9 Lion and Lamb Yard Farnham Surrey GU9 7LL

Principal Bankers

HSBC Bank plc 16 King Street London WC2E 8JF